COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 13 Oct 2011

Chapter 32: Financial Control in the Irish Red Cross Society

Mr. Michael Howard (Secretary General, Department of Defence) called and examined.

Chairman

I remind members and those in attendance to switch off mobile telephones as they interfere with the transmission of the meeting. I advise witnesses that they are protected by absolute privilege in respect of the evidence they give to the committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or make charges against a Member of either House, a person outside the Houses, or an official by name or in such a way as to make him or her identifiable.

Members are reminded of the provision within Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policy or policies. I welcome Mr. Michael Howard, who is the Secretary General of the Department of Defence. I ask him to introduce his officials.

Mr. Michael Howard

I am joined this morning by Mr. Brian Spain, who is a director from the Department of Defence, and by Mr. Michael O'Boyle, who is a principal officer from the Department.

Chairman

I welcome Ms Orla Barry Murphy, who is an Accounting Officer with the Commissioners of Charitable Donations and Bequests for Ireland. I also welcome the representatives of the Department of Justice and Equality. I ask them to introduce their officials.

Ms Deirdre O’Keeffe

I am an assistant secretary in the Department and I am joined by Mr. Terry Dunne, who is a principal officer in the Department.

Chairman

We are also joined by officials from the Department of Public Expenditure and Reform.

Ms Stephanie O’Donnell

I am accompanied by Mr. Dermot Quigley, who is a principal officer in the central policy division of the Department.

Chairman

All the officials are very welcome. I ask Mr. Buckley to introduce today's examination.

The full text of Chapter 32 can be found in the annual report of the Comptroller and Auditor General or on the website of the Comptroller and Auditor General at www.audgen.gov.ie

Mr. John Buckley

The two appropriation accounts associated with the Defence Forces received clear audit opinions in respect of 2010. A net €694 million was spent through the Defence Vote and €212 million was incurred on Army pensions. A contribution is made from the Defence Vote to the Irish Red Cross Society. A chapter in the 2010 annual report dealt with the response of the Irish Red Cross Society to concerns around its capacity to comprehensively report its transactions and track its fund raising. The scope of the review by my office was limited because the accounts of the Irish Red Cross Society are not audited by me and because I cannot examine or inspect its records as it did not receive more than 50% of its funding from State sources in 2010.

The review focused on the obligations of the funding Department to address the internal control and financial administration issues that had been surfaced by an internal review of aspects of the society's operations. The concerns raised by that review included the non-remitting of fundraising proceeds to the society's headquarters, delays in submitting returns by branches and returns not covering all funds held by branches. A trawl of all accounts held in one commercial bank uncovered 49 undisclosed accounts that held funds totalling €214,000. While most of the amounts involved were small, a particular account held by the Tipperary branch held funds of €163,000 that had been collected following the tsunami in south-east Asia in December 2004. The internal review recommended that a similar trawl be done to identify accounts held by other financial institutions.

The Department has set out the response of the society to the governance issues. In particular, it is intended to amend the statutory instrument under which the society functions and to commence a review of the primary legislation. In the meantime, the Department has reported that the society has codified its rules and procedures relating to how it manages its operations, including fundraising, and has set up an independent audit committee.

In a wider charities context, the Commissioners of Charitable Donations and Bequests for Ireland functioned as a separate Vote until mid-2011, at which point it was absorbed into the Justice and Equality Vote. The net cost of running the commissioners' office was €347,000 in 2010. The office helps trustees to carry out their obligations and invests certain charitable funds. The value of the funds under its direct administration at the end of 2010 was in excess of €30 million. The Charities Act 2009 provides for the establishment of a charities regulatory authority that will assume the functions of the office. This has not yet been established.

Chairman

I ask Mr. Howard to make his opening statement.

Mr. Michael Howard

Total gross expenditure on defence in 2010 amounted to €962 million, comprising €744 million under the Defence Vote and €218 million under the Army pensions Vote. Through the Defence Forces, the State has a single set of multi-purpose military forces focused on delivering outputs across the full range of tasks assigned by the Government. The bulk of expenditure is accounted for by the pay, allowances and pension costs of the Defence Forces and the pay of civilians employed. On 31 December 2010, the strength of the Permanent Defence Force was 9,550, and there were 728 civilian employees attached to units of the Defence Forces and 354 civil servants in the Department of Defence.

The defence organisation has a strong track record of reform and modernisation. The Croke Park agreement recognises the contribution the defence organisation has already made to the necessary process of budgetary adjustment to secure economic recovery and renewal. The June report of the implementation body highlighted a number of priority issues, such as the conclusion of the review of security duty, technician pay and substitution and acting-up allowances, the introduction of performance based promotion systems and the implementation of the medical review report. Representatives of the implementation body recently met officials from the Department. They acknowledged the progress that has been made under the agreement and noted the co-operation of the representative associations. The Department expects that the change programme will be delivered in full.

In the current economic situation, it is no longer possible to invest in major equipment purchases at the same level as in recent years. For the foreseeable future, the acquisition of defensive equipment will take place on a strictly prioritised basis to match operational capabilities and ensure the Defence Forces can carry out their roles at home and overseas. A particular focus is being maintained on ensuring modern and effective equipment is available for overseas peace support operations. In this regard, the personal equipment the individual soldier in the Defence Forces has at his or her disposal in Lebanon compares well with the equipment in use by other countries.

A number of Naval Service vessels are approaching the end of their useful lives. Following a tender competition, a contract was awarded in October 2010 to a UK company, Babcock Marine, for the provision of two new offshore patrol vessels. Preparations for construction have commenced and the first new vessel is scheduled for delivery in early 2014. The second vessel will follow in 2015. Significant equipment deliveries in 2010 included the receipt of 27 light tactical armoured vehicles and four surveillance suites, which are used on the vehicles. These vehicles provide protected mobility for troops on overseas missions. The surveillance suites are required to enhance the capability of the Defence Forces to carry out surveillance for overseas peace support operations.

Ireland is currently contributing 524 Permanent Defence Force personnel to 11 overseas missions, with the main commitment to the United Nations Interim Force in Lebanon, UNIFIL. The deployment of the 104th Infantry Battalion was completed on 27 June 2011. A total of 454 Irish personnel are currently serving with UNIFIL, including nine personnel at the force headquarters in Naqoura. The Irish battalion is based in the western sector of UNIFIL's area of operations in an area designated by the force commander. The area is centred on the major towns of Tibnin and Bint Jubayl and the blue line that separates Israel from Lebanon. The battalion is tasked primarily with patrolling, reconnaissance and ground holding, while operating in close co-ordination and co-operation with the Lebanese armed forces. The Defence Forces deployment to UNIFIL will initially be for one year, subject to renewal of the mandate and a satisfactory review of the mission. Ireland's participation in the mission is expected to continue for three to four years.

The other main overseas commitments of the Defence Forces are the NATO-led international security presence - KFOR - in Kosovo with 12 personnel, the EU training mission in Somalia with seven personnel, the EU-led Operation ALTHEA in Bosnia and Herzegovina with seven personnel, and the NATO-led international security assistance force in Afghanistan with seven personnel. The EU training mission in Somalia is commanded by an Irish officer.

The Defence Forces provided much-needed aid to the civil authorities to deal with severe weather emergencies and gorse fires in 2010 and 2011. This support in times of emergency forms a key part of the insurance policy available to the State in the form of military capabilities. The various call-out procedures that are in place nationally and locally operated efficiently during these emergencies.

The Office of Emergency Planning in the Department of Defence is charged, inter alia, with the management of the national emergency co-ordination centre, which is located in Agriculture House on Kildare Street in Dublin. Its most significant activation was for the co-ordination of the national level response to the severe weather event that occurred in November and December 2010. Reviews of response to emergency events have acknowledged the value of having an emergency centre where all the main players can come together to share information and develop a whole of Government response to emergencies.

While the largest category of expenditure is military pay, Defence Forces pensions are also a significant item of expenditure amounting to a net €212 million. The increased military pensions spend reflects the situation across the public service, where higher levels of retirements have continued to occur than was previously the case. Approximately 11,400 pensioners, comprising 9,400 retired members of the Defence Forces, 1,700 spouses and children of deceased members of the Defence Forces and 260 spouses of veterans of the War of Independence, are catered for under this Vote.

I would like to refer to Chapter 32 of Volume 2 of the Comptroller and Auditor General's report, which deals with financial control in the Irish Red Cross Society. I welcome the report's conclusions. A significant programme of reform of the society is under way. The Minister recently met with the society's chairman and secretary general and a wide range of changes relating to how the society is governed both nationally and at local level were outlined. A number of these changes are referred to in the report. The brief provided to the committee in advance of today's meeting also lists a wide range of further initiatives that have recently been taken.

Chairman

May we publish Mr. Howard's statement and the other information provided to the committee?

Mr. Michael Howard

Yes.

Deputy John Deasy

I welcome the Secretary General and the officials. I agree with Mr. Howard's statement that the defence organisation has a strong track record on reform and modernisation. The Department of Defence has downsized effectively over the years, with the strength of the Defence Forces declining from 10,434 members in 2007 to 9,550 at the end of 2010. While other Departments were getting fat, efficiencies were being applied across the board in the Department of Defence. In acknowledging this, I note also a feeling among members of the Defence Forces that if numbers fall any lower, their operational effectiveness will be threatened. It is believed throughout the Defence Forces that this would threaten their ability to retain competences within units, fulfil commitments abroad and maintain operational momentum. Therefore, while I acknowledge the efficiencies introduced by the Department and concur that it is a model for the rest of government, I must register the message I have been given from within the ranks that any further decrease in Defence Forces strength will pose a threat to their operational effectiveness.

Mr. Michael Howard

I express my appreciation for the Deputy's acknowledgement of the good work that has gone before. The challenge that arises for management at the end of the day is to get the best value that we can from whatever resource envelope is provided to us. We have a very close and good working relationship with our senior military colleagues and we have to discuss with them all the options that arise and all the difficulties that lie ahead. Obviously, there are concerns in any public organisation if there are reductions in strength. Given that we have been through a reform process, it is natural that people will reflect more upon that. Having said that, I must also acknowledge that within the Defence Forces there is a very strong acceptance of the fact that the country is in a very serious economic situation. I would not want any impression to be created that people do not acknowledge or realise that one way or another we will still have to make continuing contributions to efficiency and effectiveness and find every way we can to reduce the burden we impose on the taxpayer, as all organisations do.

With regard to Defence Forces strength, the story that we told, if I can explain it so that people understand, is that when we embarked on the reform process a consensus eventually emerged that the organisation at that time was too big for its budget and the only way it was going to get properly equipped was if we relieved ourselves of some of the burdens that were in the budget at that time. A smaller, better equipped force would do the job and that has happened. As a result of that, we have carried into this cycle of recession a lean, efficient and relatively well equipped organisation. Having said that, we acknowledge that there are more changes ahead. Ultimately, the strength of the Defence Forces is something that has to be settled as a policy by Government. However, I believe I can say that the Minister for Defence has publicly made it clear it his intention and ambition, to the best extent that he can, to try to maintain the strength of the Defence Forces at the current level. If we organise ourselves properly, I believe the organisation certainly can do-----

Deputy John Deasy

While I agree the Defence Forces are smaller and better equipped than previously, I will raise one issue. By February 2012, individuals across the public sector will make decisions on their future based on the introduction of a different pensions regime. Members of the Defence Forces have expressed a concern that some of them are doing two jobs, there are many vacancies in the Defence Forces, members are not being promoted and the embargo on recruitment has had an effect. Furthermore, operational effectiveness is being threatened and if numbers decrease further the Defence Forces operating abroad will be affected. If one takes the pension issue, the age profile in the Army has increased considerably as a result of the recruitment embargo. How will the pension issue impact on people's decisions as to whether to stay in the Army or leave? How will the Department respond if large numbers of members of the Defence Forces leave, given that the age profile has increased significantly?

Mr. Michael Howard

I am not trying to avoid the question but how we will react will ultimately be determined by whatever provision of finances we have in the 2012 Estimate. Regarding retirement, the Defence Forces have a relatively young age profile, probably younger than many other areas of the public service. It is my understanding that the average age – this is a global average that extends from the youngest to the most senior member – is in the mid to late 30s, perhaps 36 or 37 years.

Deputy John Deasy

The difference between the Defence Forces and the general public service is that members of the Defence Forces who are not promoted have to leave. They do not wait until they are 65.

Mr. Michael Howard

I accept that and, as I stated, I am not trying to completely disagree with the point the Deputy makes but trying to paint a broader background. There are still many young people in the Defence Forces for whom the question of pension and retirement may not arise yet.

I must also acknowledge that there is still a very positive atmosphere among members of the Defence Forces and people have shown great commitment and flexibility in adjusting to the reduction that has taken place over the past few years. As matters stand, the operational commitments of the Defence Forces are being met. We have successfully deployed a force to UNIFlL overseas. The personnel of the relevant battalion have gone out there and we have been able to provide them with the full suite of equipment they need. We have also been able to fill all the posts.

The question I cannot answer is how we will proceed next year. I cannot do so because the resource allocation for next year has not been fixed. However, I must draw members' attention to the fact that the Minister for Defence has stated that he supports maintaining the Defence Forces at a strength of 9,500. If that turns out to be the case, my hope would be that we would continue to deliver an effective, multi-role Defence Forces for the taxpayer which provides value for money.

There are also other areas that we will have to look at to ascertain how we can effect economies. Given that pay and pension costs are such a large part of the Defence Vote and bearing in mind the large economy drive we have had to date, the scope for economies is limited. I must point out, however, that there is always scope.

Deputy John Deasy

Let us move onto costs. The closure of military bases is a topical issue. I do not have a Defence Forces base in my constituency and do not expect Mr. Howard to speak about specific bases or policy. It has been suggested, however, that the closure of bases will cost money. How does Mr. Howard react to that suggestion?

Mr. Michael Howard

It is simply not correct. I thank Deputy Deasy for saying what I have to say. Obviously, this is an area of political discussion and one into which I cannot venture. It is a matter that has to be decided by the Government. Perhaps I may answer the Deputy's question by referring to what has already happened, which I can talk about. One of the ways in which we were able to cope with a smaller strength in the Defence Forces was that we had a programme of barrack closures. Many people outside the organisation may not fully appreciate the amount of manpower consumed in manning and securing a permanently occupied military base. As it contains an armoury and other security installations, it has to be guarded 24 hours per day, seven days per week. If the Deputy will bear with me a little on this issue, if one assumes there are 172 hours in a week, people work a 40-hour week and we cannot, in the long-term, work our personnel into the ground, in order to have one man on duty 24 hours a day, seven days a week, one actually needs a pool of five or six to draw from, and not only for the 172 hours per week because people have leave, go overseas and need to be trained. If on the basis of an estimate one was to say that a dozen people were employed in a barracks, what people fail to understand is that takes out of the manpower pool possibly 70 or 80 personnel. If the strength of the Defence Forces is at 10,500, having been reduced from 11,500, and reducing to 9,500, one of the reasons we are able to cope is that a large number of barracks were closed and the manpower pool that was being consumed guarding them - there are other jobs involved, one does not see that as a cash saving - is a huge efficiency and effectiveness gain. If I can put it this way, at whatever number of personnel we are given, whether we are able to do our operational duties is largely determined not just by the number of personnel but by what they are doing. If they are obliged to guard their own installations, run separate store rooms, separate kitchens and all the things that go with it, fewer personnel are available to be deployed. If we look at the efficiency and effectiveness gain that is available when the Defence Forces are released from the duty of guarding a barracks there is no way on this earth that it costs money - if I can put it as bluntly as that.

Deputy John Deasy

The Department of Defence sold Monaghan military barracks for €3.1 million and part of Connolly Barracks for about €900,000. Is that correct?

Mr. Michael Howard

Yes.

Deputy John Deasy

Effectively what Mr. Howard is saying that it costs more to close one of these bases does not stand up. He has given the reasons.

Mr. Michael Howard

Yes.

Deputy John Deasy

Let me develop it a little further. In the overall context of barracks owned by the Department of Defence, the Accounting Officer is saying that we are looking at downsizing and, if necessary, selling other assets and the reason for that is not just to sell for a reasonable price but the savings made, so far as management of the Defence Forces is concerned, as a result are absolutely necessary and will be necessary as the years go by. Is that the argument he is making?

Mr. Michael Howard

It enables a shift to take place from the support side to the deployable side.

Deputy John Deasy

Is it fair to say that to maintain a well-equipped Defence Force that will have to occur?

Mr. Michael Howard

Obviously there is a policy decision that Government has to take.

Deputy John Deasy

I am not trying to-----

Mr. Michael Howard

Perhaps I can put this in another way. At any level of strength, whatever it is, when the number of permanently occupied bases that one has to guard is reduced, the number of troops available for front-line deployment is increased.

Deputy John Deasy

The argument could be made that it is a strange time to sell properties and that perhaps we should wait. State assets are not infinite. Is there a need to sell these assets? Should we wait for a few years? How many properties like Connolly and Monaghan barracks are on the market? How many properties of that kind is the witness trying to dispose of?

Mr. Michael Howard

I think we have accepted, I hope, the point that we do not need to get a large sum of money for the disposal to make this viable from the Defence Forces point of view. In fact, the programme of barrack closures that took place in 2009, if all of the transactions that are in train come to fruition, will probably realise more than €5 million, which is not inconsiderable. The previous programme of barrack closures involved disposing of properties such as Clancy Barracks in Dublin, which were quite extensive and in a-----

Deputy John Deasy

A sum of €5 million. How much is saved by closing a barracks? This is what I am getting at. What is the saving so far as the management of that barracks is concerned and the 12 people who were guarding it?

Mr. Michael Howard

I emphasise this is an estimate but I think it is correct as to order of magnitude. If we were to close four barracks we would probably get the equivalent of a couple of hundred, as in 300 or 400, man years available for other duties. I emphasise I am doing this as we speak. If €50,000 per year is the average payroll cost of employing somebody, the effectiveness gain is that every 100 people is worth-----

Deputy John Deasy

A sum of €5 million.

Mr. Michael Howard

Yes. That is the type of gain we are talking about. If the Deputy were to ask me to put a figure on an effectiveness gain, essentially for the same amount of money, it is as if we were allowed to recruit another couple of hundred people in the front line.

Deputy John Deasy

Or equip them.

Mr. Michael Howard

The personal equipment is already there.

Deputy John Deasy

Yes.

Mr. Michael Howard

There is a slight imprecision in what I am doing but I emphasise that I think it is correct as to order of magnitude.

Deputy John Deasy

Perhaps I can move on to Defence Forces land. The Department of Defence has in its control 8,200 hectares. Is that land in State ownership?

Mr. Michael Howard

The great majority of it is accounted for by a relatively small number of large properties including the Glen of Imaal firing range, Kilworth firing range, Baldonnel Aerodrome. These are places with very big footprints but we do own that land. There has been quite an extensive process of review in an effort to reduce the amount - this is entirely separate from barrack closures - and at present we have of the order of 30 properties, including married quarters surplus, and areas for sale.

Deputy John Deasy

Let us go to married quarters, in the account the witness stated that there are buildings at 100 different locations and 20 properties, outside of barracks, that use married quarters and that he is in the process of selling these married quarters. Is that the case?

Mr. Michael Howard

There is a general policy where possible to dispose of married quarters to the occupiers.

Deputy John Deasy

I want to move on to the Border duty allowance. Why does this allowance still exist? The allowance continues to be paid to 1,132 members of the Defence Forces. Is this allowance being phased out? Is there an attempt to buy out the allowance? How long can we expect this allowance to be paid given that it seems to have gone beyond its sell-by date?

Mr. Michael Howard

It is ring-fenced for all the people who currently hold it and it is on a holder basis.

Deputy John Deasy

Yes.

Mr. Michael Howard

I am informed that the current number as of now is 860. It will take quite a period for this allowance to work its way out of the system. To explain in a nutshell, we sought to withdraw it. The representative association took us to a third party, as is provided for in the conciliation and arbitration scheme, and it won and we lost.

Deputy John Deasy

May I ask a question about PDFORRA which I understand is seeking union status? The Department supports the association to the tune of €500,000. If union status is attained, will the Department continue to fund the union to the tune of €500,000?

Mr. Michael Howard

There is a very serious policy question which would have to be faced before anybody is granted military representative association trade union status. It has always been the policy position that these are not trade unions, they are representative associations. They are established in a way and subject to a legal and regulatory framework which seeks to balance two things - to give the members of the Defence Forces the legitimate right of representation in regard to pay and conditions of service and access to the normal third party procedures that employees would have. It also restrains the associations in order to ensure that the existence of representation cohabits happily with the system of military authority and discipline and command. Therefore, they do not have the right to go on strike, withdraw labour or anything like that. I would have to say to the Deputy, without getting into it, that has been the settled policy for a long time and I do not envisage any change in it. Obviously it is not a matter for me here at the committee. That brings me to the second point - the question of subsidy. When the associations were established in 1990, as part of the agreed arrangements, they were treated on the same basis as the Garda representative associations were then treated, namely they were given support in regard to accommodation and personnel were seconded from the Defence Forces full-time to be the officers of the association. The public policy in regard to that would be, since it was considered that these were not fully independent trade unions, that the officers of the association should be serving members of the Defence Forces and they were released for that purpose. When calculating the quantity of support given to the representative associations, it includes the salaries and costs of the staff who are seconded to them. That is obviously something which has to be kept under review, but its origins lie in the fact that they are not a union and that they still remain part of the Defence Forces, even though they have a separate identity. The general secretary and the deputy general secretary of the association remain military personnel and they are paid as such.

Deputy John Deasy

I think about €130,000 was spent on ceremonial duties. What is that made up of?

Mr. Michael Howard

Does this entail the recent State visits of Queen Elizabeth and President Obama?

Deputy John Deasy

I am just asking about general expenditure. I am not really focusing on those two events. Where does the bulk of that figure come from?

Mr. Michael Howard

I will not hazard a guess. This matter will be dealt with in a formal letter of reply.

Deputy John Deasy

That is fine.

Mr. Michael Howard

I expect it may be in respect of travel and transport costs, but I will get the details for the Deputy.

Deputy Michael McCarthy

I welcome Mr. Howard, his colleagues and the officials from the various Departments. I want to touch on the internal review into the Irish Red Cross. I must state at the outset that the report concluded that there was no misappropriation of accounts. However, to put it mildly, there were issues about weakness, controls and corporate governance. The Irish Red Cross is a charity that has huge public goodwill. In spite of the economic difficulty in which this country finds itself, people have been very generous towards specific requests for funding in places like Haiti and the Horn of Africa.

Mr. Howard's Department gave almost €1 million to the Irish Red Cross last year. That is a lot of money. There is a representative from the Department on that board. This committee has received correspondence which alleges that money collected for a specific purpose was not expended on that purpose. Has the departmental representative on the board of the Irish Red Cross been asked to raise this issue at board meetings? Have those allegations been investigated? What action has the Department taken following the audit? To be fair, it did conclude that there was no misappropriation of accounts, but there was one incident where there was €160,000 in an account in Tipperary, while there were 49 undisclosed bank accounts at various locations throughout the country. What action has the Department taken? How effective has the departmental representative been on the board in terms of the Department addressing this issue?

Mr. Michael Howard

I would like to state at the start - I am glad the Deputy has drawn attention to it - that this is not a question of any money going missing or anything like that. It is important that it is discussed in that way. It is absolutely the case that there have been severe difficulties with corporate governance in the Irish Red Cross. The issue to which the Deputy refers illustrates that. There is a strong process of change under way in respect of corporate governance. A former Secretary General of the Department of Defence was appointed by the previous Minister as chairman to the board of the Irish Red Cross. There is a new secretary general. They have put in place a very substantial programme of corporate governance reform. The Minister has met the chairman and the secretary general. I have also met with the chairman on a number of occasions. I am quite satisfied there is a very strong programme of reform under way.

The Executive Committee of the Irish Red Cross is meeting again this morning and the intention is that another suite of measures will be formally approved. From that point of view, we can be confident that there is a very strict process being put in place to ensure that branches throughout the country are given a checklist with which they must comply and which they must certify to head office. When all of the measures have been put in place, there will be a very good programme of financial management and corporate governance in place in the Irish Red Cross.

The Department has been engaging with the Irish Red Cross since 2008. There was a review of corporate governance produced and we have been talking to the Irish Red Cross about that. There will be a new statutory instrument or Government order put in place which will give effect to a new corporate governance regime. After that, it is provided in the programme for Government that there will be a review of the legislative basis. I appreciate that brings us into the policy area, but this work is in train. The current order to establish the Irish Red Cross dates back to 1939. We have been talking to the Irish Red Cross about the review and we are making very good progress.

A number of deficiencies were exposed in the Comptroller and Auditor General's report and there is no dispute about that. It is important to state two things from the point of view of the public having confidence in the Irish Red Cross. First, no money went missing, rather there were administrative shortcomings, which is quite different. Second, the situation today is quite different. Things have greatly improved and there is a very big programme in train which, when fully delivered, will give people full confidence in the Irish Red Cross.

Deputy Michael McCarthy

Correspondence was received by this committee, containing an allegation that moneys collected for disasters overseas never actually went there. Mr. Howard's Department has a representative on that board. Was that allegation made to his Department? Was the Department's representative on the board of the Irish Red Cross asked to investigate that allegation? If the answer is "Yes", what was the outcome?

Mr. Michael Howard

I hope the Deputy understands that I am not trying to be obtuse. I hope we are talking about the same issue, which is the €160,000. Is there some other issue that has been brought to his attention?

Deputy Michael McCarthy

There is an issue in respect of corporate governance, the different accounts and the Tipperary account. The audits concluded there was no misappropriation of funds, but allegations were also made, in correspondence to this committee from a person previously involved with the Irish Red Cross, that moneys collected for a specific disaster were never spent on that disaster.

Mr. Michael Howard

I am not sure we are talking about the same thing. Are we talking about something other than the tsunami?

Deputy Michael McCarthy

Yes.

Chairman

In February 2010, more than €600,000 of publicly donated money, intended for the victims of the Haiti earthquake, was reallocated to the Irish Red Cross domestic account and, as such, never left Irish shores. That is what Deputy McCarthy is talking about. The question is pretty clear. The complaint was made. Did the Department receive the complaint? Was the complaint raised by the departmental representative on the board? These are pretty clear questions and we would like a clear answer to them.

Mr. Michael Howard

I am sorry. That was a genuine misunderstanding on my part. This is in respect of Haiti. We have investigated this. I have been informed that the Irish society in this matter conforms exactly with the practices of national societies of the Red Cross right across Europe, which is the following. When the Irish Red Cross makes an appeal for a particular purpose, it will receive donations to the particular fund it has established. Its general level of donations may also rise. I understand that the Irish society conforms with the practices of the Red Cross generally, which is that when donations are made specifically to the fund for a particular disaster, that is where the money goes, but the general rise that may take place is regarded as being available for the society's general purposes which may include other relief work. I am assured the Irish society's handling of this matter is in conformity with the practices of the Red Cross societies across Europe.

Deputy Michael McCarthy

I accept that. Was the allegation made to the Department? Was the Department's representative on the board of the Irish Red Cross Society asked to investigate that allegation and, if so, what was the outcome?

Mr. Michael Howard

Please understand that I am not trying to run away from the specific question. The Deputy is addressing this on the basis of the Department's representative on the Executive Committee.

Deputy Michael McCarthy

Was that representative asked to investigate the allegation, assuming it was made to the Department in the first instance? To clarify the context, there is a lot of money from the Department going to the organisation. There is a specific allegation that moneys were collected for a purpose and then diverted to a domestic channel. Was the representative on the board asked by the Department to investigate that allegation, to enter into negotiations or discussions and draw conclusions?

Mr. Michael Howard

It was investigated by the auditors of the Irish Red Cross. The auditors investigated the matter and found the accusations to be groundless. Does that answer the question?

Deputy Michael McCarthy

It does.

Mr. Michael Howard

To be honest, when we started, I thought we were talking about the Tipperary account. I was not trying to-----

Deputy Michael McCarthy

There is a whole series of things. It goes back to the issue of corporate governance. I want to know how the effectiveness of the Department's representative on the board.

Mr. Michael Howard

I will give the Deputy an honest answer. It is a great difficulty from our point of view. People sometimes seem to think the Irish Red Cross is a body under our aegis. It absolutely is not. The way the Irish Red Cross is established-----

Deputy Michael McCarthy

May I interject briefly? I understand that, but it does receive almost €1 million in funding from the Department, and there is a departmental representative on the board.

Chairman

Deputy McCarthy is happy with the reply, but the question was this. Did the Department receive the complaint from the general public? Was the query about the €600,000 made known to the Department? If it was, did the representative on the board raise the issue for clarification? It is a simple question.

Mr. Michael Howard

The answer to the Chairman's question - I am sorry if this is not satisfactory to you - is that, as I sit here, and I am reluctant to say this without verifying it, I do not believe it was brought to the Department's attention specifically. That is my honest belief right now, but I am not 100% certain. To be honest, in our briefing and preparation for this meeting, it was not one of the issues we reviewed, although we did go over a lot of the stuff to do with the Irish Red Cross, anticipating that members would have questions. I hope you will allow me to give you that answer, and if it turns out not to be the case, I will correct it for you. This issue will be addressed in a formal reply to the Committee.

The second question is the role of the Department's representative. I was going to address this in terms of corporate governance. The present situation with regard to the council of the Irish Red Cross is that the Government appoints the chairman and at least one-third of the members. The best practice, as per the International Committee of the Red Cross, ICRC, is to minimise government involvement in running the organisation. Part of the programme of corporate governance reform entails reducing the Government's input to the Central Council. I am putting this in front of the committee because if it has not been addressed, it is something I should tell members. Whereas, for example, the chairman is at present appointed, in future he or she will be elected. As things stand, the Irish Red Cross is largely in the control of the elected representatives of its members, and at the end of this process of reform it will be more so.

This raises a policy question that we will have to address for the future. The Deputy and the committee are quite right that we are giving a substantial amount of cash to the Irish Red Cross as a grant-in-aid towards its running expenses. I must emphasise that there has never been any question about the correctness of this expenditure. We have checked and received assurances from the Irish Red Cross in this regard. The other money we are talking about is money the Irish Red Cross collects itself, and in its view it is its money.

The ICRC is anxious, as a principle, to maintain the separateness of the Red Cross organisation from governments. Thus, we are walking a tightrope. I emphasise that at present we have a good relationship with the people who are running the Irish Red Cross. They are very open and co-operative with us. However, our ability to exercise any kind of directive control is narrow enough as things stand. This is an issue we will have to face in the future because many national Red Cross societies do not have any government representatives and there are other countries in which national Red Cross societies have government representatives but without voting rights. This is a trend the Irish Red Cross Society seeks to support. Without going into it in any detail, if it is legitimate for the Irish Government to interfere with the Irish Red Cross, perhaps for the best of motives, it is also legitimate for other governments elsewhere.

Deputy Michael McCarthy

The Department gives the Irish Red Cross just under €1 million. I accept and understand that it is not under the aegis of the Department and I know about the threshold that precludes this. With regard to the various allegations, from the point of view of corporate governance, is Mr. Howard satisfied and is the Department satisfied, following the audits, that there are now structures in place to address the deficiencies in the system? Has this somewhat damaged the reputation of the Irish Red Cross, an organisation that does a lot of good work and towards which there is a lot of good will? Allegations such as these - although I emphasise that it was not concluded that there was misappropriation of funds - unfortunately raise questions, and this has an impact on the benevolence of the Irish people towards the organisation. Is the Department happy, following the audits, that structures have been established to address the deficiencies within the organisation?

Mr. Michael Howard

The simple answer is "Yes." We have sought assurances and explanations from the Irish Red Cross and all of our inquiries have been dealt with helpfully and constructively. As things stand, we are satisfied with the programme of change and reform at the Irish Red Cross Society.

Deputy Michael McCarthy

Are other charities that receive State funding, such as Trócaire, required to produce accounts showing where it is spent and so on?

Mr. Michael Howard

This is not something that falls within the domain of the Department of Defence, but the short answer is "Yes". If the Irish Red Cross were to get money from Irish Aid, it would have to go through an accounting procedure to satisfy the Department of Foreign Affairs that the money had been spent correctly.

Deputy Michael McCarthy

Although the Charities Act 2009 has been passed, I do not think its provisions have yet been implemented.

Mr. Michael Howard

That is not within our domain.

Deputy Michael McCarthy

I would like to ask Mr. Howard about another issue when this question has been answered. The Act has not yet commenced. What stage is it at?

Ms Deirdre O’Keeffe

The provisions of the Charities Act 2009 transferred to the Department of Justice and Equality in May. A small number of sections of the Act have been commenced. The commencement of the remainder of the Act would require the establishment of a charities regulatory authority, which has implications for the Exchequer as it would require significant funding. What we have been doing since the portfolio transferred to us in May is considering the best way forward in the context of the Exchequer difficulties we face. Put simply, we are considering all the programmes in the context of the comprehensive review of expenditure with a view to determining the best way forward. We are conscious - to repeat what the Deputy himself said - of the importance of ensuring continued confidence among the Irish public in the various charitable organisations in the State.

Deputy Michael McCarthy

Does Ms O'Keeffe have any idea how long that will take?

Ms Deirdre O’Keeffe

I do not at this stage. That is the simple answer. We are considering at the moment what is the best thing to do.

Deputy Michael McCarthy

I have one more question for Mr. Howard with regard to the issue of Army pensions. According to the appropriation account for 2009 in respect of Army pensions, €1.7 million was spent in payments to veterans of the War of Independence. A further €1.4 million was spent on these payments in 2010. I know this is diminishing as the years go on. Given that the war concluded in 1922, can we be specific about how many people are in receipt of this money, who they are and their age profile?

Mr. Michael Howard

The number is reducing quickly. The first thing I should say is that none of the money is now going to actual veterans; it is all going to widows or spouses. For 2011, the amount is about €1.4 million. There are about 260 people still receiving pensions. For example, some 320 were receiving it during 2010. The current number is 260 and they are a fairly elderly cohort. I emphasise this relates to survivors and no longer to the veterans. The last actual veteran died in 2006.

Deputy Michael McCarthy

The last veteran passed away. Is that correct?

Mr. Michael Howard

Yes.

Deputy Michael McCarthy

The money is now going to the widows of the veterans and they number 260. Is that correct?

Mr. Michael Howard

Yes.

Chairman

I refer to one of the questions Deputy McCarthy asked. If it collected €600,000 in the appeal for Haiti is there any obligation on the Irish Red Cross to pass on a certain percentage of that or to make so much available to the appeal?

Mr. Michael Howard

My understanding is that if one donates to a specific fund, the money goes to that but if one donates to the Irish Red Cross generally it becomes part of the general expenditure. I have had the opportunity to read a document submitted to the committee which I had not seen previously. I note there is a reference in it to the Department having been made aware of this. I refer back to what I stated earlier. I do not want anyone to take it that I am questioning the validity of that. I must have it investigated but I wish to address the specific point made by the Chairman. This was examined by the society's auditors. My understanding is that the auditors were satisfied that it was following the Irish Red Cross policy. In other words, my understanding is that when the Irish Red Cross makes a specific appeal, their general donations and the specific appeal both collect money and there would be an increase in the general donations because perhaps it puts the Irish Red Cross name out in public. I understand the society is allowed to use general donations for its general purposes and that if one donates specifically to a tsunami appeal or a Haiti appeal, 100% of it goes to that cause.

Chairman

Is the total fund expected to be delivered to a given appeal?

Mr. Michael Howard

That is what I believe.

Chairman

Is that correct? Are organisations that collect for various appeals advised that they must send 100%, as Mr. Howard stated?

Ms Orla Barry Murphy

I am not sure whether they are so advised because up to now there has been no regulation of charities and there is no general adviser. Anyway, there is an obligation on charities to apply the moneys they collect for the purpose they claim they will apply it for. If money is left over or if they cannot apply it as they have stated, there is a legal mechanism to apply it for a different purpose. Depending on the level of funding, generally speaking, that mechanism would involve going to the High Court for an order to apply the money differently.

Chairman

Must organisations go to the courts to apply it?

Ms Orla Barry Murphy

Previously, it was to the courts but since 2002 they have gone to the Commissioners of Charitable Donations and Bequests for Ireland. It can make an order authorising the trustees of a charity-----

Chairman

Do you ensure all of these trustees and charities are familiar with the law to ensure some sort of compliance?

Ms Orla Barry Murphy

No. No one is there to do that at the moment.

Chairman

There is no one where?

Ms Orla Barry Murphy

There is no one in the country with that mandate. This is one of the provisions that will be dealt with or that is being dealt with in the 2009 Act.

Chairman

At the moment there is no policing of that obligation whatsoever.

Ms Orla Barry Murphy

No, not as far as I am aware.

Chairman

I find that amazing.

Deputy Michael McCarthy

I wish to direct a question to Ms Barry Murphy. Let us suppose there is an appeal or a collection. Hypothetically speaking, if someone is on Grafton Street or Patrick Street in Cork and has a bucket and after one day there is €1,500 in that bucket, how much of that money goes to the people who should benefit directly from it? How much is retained for administration and so on?

Ms Orla Barry Murphy

Every charity is different. Some will publish that information but many do not. I believe this is one of the reasons for the implementation of the Act. Let us suppose there is someone with a bucket. What is to stop someone dipping their hand in and taking several hundred euro out of it before they return it to the charity? Up to now, there has been no policing of that and this is one of the reasons behind the implementation of the Act.

Deputy Michael McCarthy

Will that be addressed in the Act?

Mr. Terry Dunne

Any public cash collections are covered by the Street and House To House Collections Act 1962 administered by An Garda Síochána. If one wishes to carry out a cash collection on the street, one must get a permit from the local chief superintendent for the area in which one wishes to undertake it and one must specify the purpose or what the collection is for. If a collection is undertaken and the moneys are subsequently not spent for the purposes under which the permit was granted, then one could argue that the organisation or charity has been in breach of the conditions that govern its being issued with the permit and that would be a matter for An Garda Síochána.

Chairman

The problem is that what Ms Barry Murphy discussed about dipping in and taking an amount out of a collection is one issue and that is always a risk. The other issue of how one actually accounts for what is left in the bucket and what goes to the charity remains. There is no one to account to for that. There may be a law enforceable by the Garda but if one does not know how much was in the bucket and one does not know who should receive it, no one can make a charge or a complaint to the Garda. Essentially, it is up to the charity or organisation to ensure that its obligation is met and that 100% of what was in the bucket goes to the charity. This State has no one to police that because the Act has not been put in train. Is that correct?

Mr. Terry Dunne

The position is that there are certain gaps in the Street and House To House Collections Act 1962 which the Charities Act sought to address. One issue that came up when the legislation was being developed was the matter of open bucket collections and how vulnerable they are to abuse by people. There are provisions in the Charities Act that have not been commenced yet because the authority is not in place. Under these provisions sealed containers would be used and they could only be opened by certain authorised individuals within the charity who, in turn, would have to account for the amount in the containers to which the collector would not have access. These provisions were in the Charities Act 2009 but they cannot be commenced because the authority would have a role in such collections. Until the authority is in place we cannot commence these sections.

Chairman

This is why the matter is most important. It is alleged by the writer of this complaint that millions - these are his words, not mine – would have been collected and spent on the domestic activities and expenditures of the Irish Red Cross. It is important that information of that nature that finds its way into the public domain is corrected. That is important for the Irish Red Cross but I have not heard a strong defence or response to the writer of this letter.

Mr. Michael Howard

I wish to make one observation having followed what has been said. The discussion has been about the bucket in the street. The fact is that at present in 2011 the majority of money received by the Irish Red Cross, for example, is donated via the Internet, whereby people pick from a dropdown menu what specifically they wish to donate to and because they can do this, it is 100% guaranteed that the donation will go there.

In defence of those in the Irish Red Cross, they are very alert to this criticism being made and they are most anxious to be in a position to assure people that they are compliant. This is one of the issues they are addressing. I do not wish for anyone to be left with the belief that it is otherwise. There is a difficulty in addressing an allegation. Someone comes up and says things went years ago and it may or may not be the case that we can address that. Anyway, a member of the public who is contemplating making a charitable donation may do so assuredly. If one makes a donation to the Irish Red Cross using its website and one picks from a dropdown menu what one wishes to donate to, that is where one's money will go. The majority of its money comes in that way. The discussion is legitimate and people have a right to address their concerns to the committee but I am mindful that the Irish Red Cross does so much good work at home and overseas and I do not wish for anyone to be left with the belief that if they are contemplating a donation today on the website, then they need have any fear about it because I do not believe they should.

Chairman

The positive side of a complaint, even to a committee such as this one, is that you get the opportunity to put the appropriate message out there.

Mr. Michael Howard

I accept that.

Chairman

That is what I am inviting Mr. Howard to do-----

Mr. Michael Howard

I thank the Chairman.

Chairman

-----as the necessary clarity was not present before he made the statement.

Mr. Michael Howard

I thank the Chairman. I appreciate the opportunity.

Ms Deirdre O’Keefe

I would not like there to be the impression that there was no regulation. There is quite a lot of regulation of charitable organisations throughout Ireland. The nature of regulation depends on the legal form of an individual charity. Approximately 4,000 charities are actually companies which are subject to a wide range of company legislation and obligations. Some charities are trusts and are subject to trust law.

Many charities are registered with the Revenue Commissioners and are subject to its law. Mr. Dunne said there is always recourse in the case of a complaint to the Garda Síochána because many areas are governed by various pieces of legislation. The purpose of the Charities Act is to bring unification and governance to the charitable activities of organisations.

Chairman

I thank Ms O'Keefe for the clarification. On pensions, during the year €71,658 was written off in respect of 55 cases of overpayment of pensions. How did that occur? Was there a systems failure?

Mr. Michael Howard

It usually occurs because of the late notification of the death of a pensioner.

Chairman

That is the extent of it.

Mr. Michael Howard

Yes.

Deputy Michael McCarthy

Representatives from the Department of Social Protection came before the committee some weeks ago. They outlined overpayments which were colossal in comparison to this. I presume the families of those who are deceased would apply to the Department of Social Protection for a bereavement grant. One arm of the State continues to pay a pension, even for a short period, while another has issued a bereavement grant in respect of an individual. An interdepartmental system is needed to address that issue and prevent it from happening.

Mr. Michael Howard

We will consider the issue. We liaise with the Department of Social Protection. It is a difficult time to approach people. I appreciate material sums of money are involved but it was not all paid to one person.

Chairman

An overpayment of €72,000, whether in the form of a pension or something else, needs to be noted.

Mr. Michael Howard

Yes.

Chairman

The Department recovered €395. It should have not been allowed to happen in the first place. The families of pensioners should be kept in touch with because they have to be assisted during a difficult time. They do not like owing money or being overpaid. It causes difficulties in their lives.

Mr. Michael Howard

An additional piece of information is in my brief. The figure of €72,000 refers to 55 cases and one case accounts for €54,000. It involved a person who remarried while in receipt of a widow's pension and failed to notify the Department. I feel I have an obligation to tell the committee about it. The other 54 cases involved relatively small amounts of money.

Chairman

It does not make it better.

Mr. Michael Howard

I fully understand it makes it looks worse but since the Chairman mentioned the issue I had to give him the information.

Deputy Simon Harris

I thank Mr. Howard and others for the presentation. The discussion and comments on issues such as barracks and costs have been helpful in informing public debate. It is also clear from the Vote that the overwhelming amount of the Department's funds are spent on Army personnel. There would be widespread agreement that they do a very fine job.

I want to return to the issue of the Irish Red Cross. I accept the Department is not answerable for a lot of what happens there. There are a number of issues on which I need to get an insight into the Department's thinking. In 2005 and 2006 external audits of the Irish Red Cross flagged problems of governance and a lack of financial systems. Those audits and those in subsequent years highlighted problems. There have been recurring problems over a number of years. Each year the Irish taxpayer donates money to it. The Minister of the day appoints the chairman and up to 30% of the central council, which I presume is the board.

What is the role of the representative on the central council appointed by the Department to the Irish Red Cross? I am not quite sure why he or she is in place, if not to flag problems such as those to which I referred, to the Department and to tell it it needs to be careful with taxpayers money. Likewise, the Department could revert to the person and ask if there was an issue he or she could examine or raise. I hope we are not appointing people to the central council as political gifts. I presume such appointments are similar to those appointed to the boards of banks to look after the public interest. To whom do they report? How are they appointed? What are the criteria? It would be helpful to have the information.

Mr. Michael Howard

That is a very good question. I will give the Deputy an answer he may not find entirely reassuring. The truth of the matter is the departmental representative has no specific role. He or she is simply a member of the central council, two thirds of whom are elected by members of the association. The Government appoints the chairman and one third of the members. Obviously the Department official would have, in an informal sense, a liaison role with the Department but he or she does not have any formal authority that is any different from any other member of the central council. It arises from the role of directors generally. The Department's appointee is entitled to and would be expected to assure us that the grant-in-aid is being spent correctly. I understand our subscription to the international federation totals €130,000 and the remainder is a grant towards the running costs of the head office.

I referred earlier to the independence of the Irish Red Cross from the Government and the direction in which we are travelling. There is no question that there is a policy question before us in terms of whether we reform the corporate governance at a top level in the Irish Red Cross, as intended, and reduce the Government component. We may have to put another arrangement in place to ensure we have accountability on grant-in-aid. It is not just an issue for me as an Accounting Officer. As an Accounting Officer one simply does not have the control over grant-in-aid one can exercise over expenditure that falls to the Department.

Deputy Simon Harris

On the liaison role, if I was in the Department of Defence and audits came from the Irish Red Cross for 2005, 2006 and 2008 and media reports appeared every month from October to December 2010 and again this year, I would be concerned. Taxpayers have a significant vested interest in the organisation. Whatever the Irish Red Cross thinks is its business, the purpose of this committee is to defend the €1 million contribution from taxpayers. Did anybody in the Department of Defence contact people in the Irish Red Cross and ask them what was happening?

The previous Minister for Defence came under huge political pressure when the Irish Red Cross changed its mind about carrying out an independent investigation because it had already picked a company, Mazars, to carry out an independent inquiry into the goings-on in the organisation. We might not have a majority, but we have up to 33% because the 1939 Irish Red Cross Society Order states we can have one third of the members. The chairman of the board is appointed by the Minister and we have €1 million a year going in. I seek reassurance that someone in the Department spoke to our representatives on the board. Otherwise, why do we have them? Why are they there if there are hugely damaging media reports about the operations of the Irish Red Cross, whether true, untrue, fair or otherwise. The Chairman has pointed out that he is concerned, as I am, about people continuing to contribute. Media stories were extremely damaging to the credibility of the Irish Red Cross and the confidence of the people in contributing. What is the role of the board members appointed by the Government?

Mr. Michael Howard

Whatever about the departmental representative, the other members and the chairman have no reporting relationship. It has simply been the convention that in appointing at least one-third of the central council members one of them is an official of the Department. The others do not form some a distinct cohort who report back to the Department, nor should they. That was the point I was making. The whole structure laid out in the 1939 order is to secure the independence of the Irish Red Cross from the Department and the Government. However unsatisfactory it may be, that is the policy intention of the structure.

Many of the members who were appointed by Ministers during the years have been members of the Irish Red Cross who approached the Minister to say they had an interest in being appointed to the central council. They did not come from the Department. Similarly, chairmen have been selected by Ministers on the same basis. The current chairman is the first former Secretary General in that role. I cannot go into it, but there is a particular dimension of leadership and acknowledgment of the need for probity that anyone who has worked as an Accounting Officer would understand.

I do not want to give the impression that nothing happened in this matter until recent months. I mentioned the review of governance in the Irish Red Cross. That dates back to 2008. Action was taken in response to the qualified audits in 2006 and 2007, and the auditor subsequently acknowledged that there had been an improvement. I do not want anyone to have the impression that nothing was done when these difficulties arose. However, I have to be very honest and say the members of the central council were not made aware of the figure of €160,000 until comparatively recently. That is my knowledge and I ask to be corrected if I am wrong.

Deputy Simon Harris

To Mr. Howard's knowledge, did anyone in the Department of Defence contact the Irish Red Cross when it made its decision to suspend what had been announced as an independent inquiry into what were, at the very least, serious corporate governance issues and say, in the interests of the Irish Red Cross and the confidence of taxpayers in the €1 million they give each year, there should be an independent inquiry?

Mr. Michael Howard

That decision was taken without reference to the Department of Defence.

Deputy Simon Harris

We live in a society where every public representative knows the number of hurdles a person must jump over, in terms of compliance and producing certificates, in order to qualify for a disabled person's grant, for example. The Irish Red Cross does wonderful work internationally, but that is not the issue. At issue is the sum of €1 million which we are giving in a blasé fashion. I welcome the commitment given and positive steps taken in the programme for Government, but it is late in the day. However, I thank Mr. Howard for the explanation.

Deputy Eoghan Murphy

I thank Mr. Howard for the answers he has given. I will continue on the same theme as Deputy Harris. Did the committee invite representatives of the Irish Red Cross to attend this meeting?

Chairman

The Irish Red Cross is not accountable to the Committee of Public Accounts.

Deputy Eoghan Murphy

We cannot invite them?

Chairman

We can. That is a different question.

Deputy Eoghan Murphy

We did not think to invite them?

Chairman

It is not that we did not think to invite them. We have been given the report of the Comptroller and Auditor General whose explanation is that he does not deal with the accounts of the Irish Red Cross because they are below a certain threshold. The Irish Red Cross is not, therefore, answerable directly to the Committee of Public Accounts, rather it is answerable to it through the Comptroller and Auditor General and the Department of Defence. The Accounting Officer of the Department of Defence is present.

Deputy Eoghan Murphy

Could we have invited them?

Chairman

If the Deputy wants to suggest we invite representatives of the Irish Red Cross, he may do so.

Deputy Eoghan Murphy

It might have been a good idea to bring in representatives of the Irish Red Cross to ask them questions, considering we are talking so much about the organisation. Serious governance issues have been raised and questions remain to be asked of the Irish Red Cross directly. Mr. Howard says he is not responsible for the organisation, yet he is here to defend it. This seems to be a precarious position for him.

Chairman

We can write to the Irish Red Cross arising following this meeting, send the transcript of the proceedings and ask it to respond.

Deputy Eoghan Murphy

That would be good.

Chairman

It is not that we cannot do anything. The Department and the agencies were scheduled to attend this meeting.

Deputy Eoghan Murphy

In the future we might consider writing to organisations which we will be discussing in such detail in order that they can have someone here to defend them or give more in-depth answers on what is happening. Mr. Howard is in a difficult position. He does not defend the organisation, yet that is what he has to do today.

Chairman

That is a fair point. We will send a copy of the transcript of the meeting to the Irish Red Cross and ask for a response. If necessary, representatives of the organisation can come before us.

Deputy Eoghan Murphy

What powers does the 1939 order give the Department of Defence over the governance and financial accounts of the Irish Red Cross? Can the Department see the organisation's accounts?

Mr. Michael Howard

The accounts are published. We see them in that context. The order does not establish a reporting relationship. The legislation provides the authority for the Government to make an order which sets out the structures of the Irish Red Cross. It gives the State no role in the management of the Irish Red Cross. In fact, it is written in such a way as to secure the independence of the organisation.

Deputy Eoghan Murphy

Where is there oversight of the organisation?

Mr. Michael Howard

In the central council. It also has to produce audited accounts. The body charged with responsibility for the running of the organisation is the council of the Irish Red Cross.

Deputy Eoghan Murphy

I am unclear on the Irish Red Cross's actual operations in this country. Many organisations do this work and we put them all into the same bracket. The Irish Red Cross raises money in Ireland. Does it engage in operational activities here?

Mr. Michael Howard

The Irish Red Cross has a nationwide branch organisation of volunteers who do much support work in their local communities.

Deputy Eoghan Murphy

This is an organisation which is raising money and working here, yet it is only accountable to itself and its internal committee.

Mr. Michael Howard

I hope I am answering the question I am being asked. I can account to this committee for the grant-in-aid and say it has been properly expended. I cannot account for the decisions and actions of a body which is constitutionally independent of the State. In its own activities, it is like any other voluntary body. It must produce audited accounts. It has, under the order under which it was established, the equivalent of a constitution and rules. In that respect, it is like any other autonomous body.

Deputy Eoghan Murphy

In another respect, we provide a significant amount of money. Mr. Howard has said we are concerned about how our money is spent, not about the private money the organisation raises.

Mr. Michael Howard

Yes.

Deputy Eoghan Murphy

The bulk of our money is spent on administration, governance and such issues.

Mr. Michael Howard

It is entirely a grant-in-aid towards the cost of the permanent staff in head office.

Deputy Eoghan Murphy

That is good. Such organisations need to be administered. They need to pay for staff. It is good that the money they raise can be spent on the actual items for which they are raising it. This is, however, a significant intervention on the Government's part with taxpayer's money. It is not acceptable to say we are concerned about how that is spent, not about the rest of the operations of the organisation. It is a significant amount of money for the organisation. If a private trust, for example, had a similar spend, it could certainly make certain requests of the organisation as to what was going on internally should concerns be raised. We did not seem to do this.

Mr. Michael Howard

I ask the Deputy to understand I am describing the structure as it stands. While the international federation could probably hold the Irish Red Cross to account, the Government cannot.

Deputy Eoghan Murphy

Did we ever think to raise it with the international federation?

Mr. Michael Howard

We have talked to the international federation and we have had meetings with its members within the compass of recent months. They are fully au fait with what has been done in terms of corporate governance reform and fully supportive of what we are doing.

Deputy Eoghan Murphy

Deputy Harris referred to concerns raised in 2005 to 2006 - I do not have the exact dates. Was the Department aware of those concerns about governance issues and the spending of fundraising money when they were raised initially in 2006?

Mr. Michael Howard

There are two questions involved. The auditors raised questions about the financial accounting generally. I remember at the time they hired financial consultants. That was a management issue. Then there was a specific issue which is to do with the €163,000 in an account. That was dealt with administratively by the Irish Red Cross. I do not have the date when the Department became aware of that but it is comparatively recent.

Deputy Eoghan Murphy

By recent, does Mr. Howard mean six months?

Mr. Michael Howard

I would say within the past 12 months.

Deputy Eoghan Murphy

Would we have approved any further money into the society once those concerns were raised?

Mr. Michael Howard

The short answer is "Yes". I will explain the historic origins of the grant-in-aid. Up to a certain point in time some years ago, the Department used to give a precise sum of money which was the cost of the salaries of the staff. At a certain point in time, this was converted into a grant towards the costs because they may have wanted to hire more people, which the Department would not have been willing to sanction or they may have wanted to have some autonomy regarding their pay and promotion structure. They were given a block grant which does not fully meet the cost of their salaries. We also pay the subscription to the international federation which is about €130,000 a year. Those are the two costs borne by the State.

Deputy Eoghan Murphy

Concerns were raised about financial accounting practices or administration. We are the people paying for it and we continued to pay for it regardless of the concerns being raised and before the Department did anything about it.

Mr. Michael Howard

The concerns raised did not relate to the State funds. I appreciate this does not mean that we do not have an interest in it or that we would not want to see proper procedures. However, I must make the point that the State funding was never the issue here and this limits the moral authority of the Department in questioning the Irish Red Cross. One would be on far stronger grounds if a question arose with regard to the payroll which the Department is paying for than if something arises about money which the Irish Red Cross had fundraised and was expending on its own purposes.

I would not wish the impression to be given that no action of any kind was taken when those concerns were raised. It must be remembered that a financial consultant was hired around that time so some process of reform was put in place and the corporate governance review was initiated in 2008. It is not the case that no action was taken. I am confident that as regards the specific issue of the €163,000 that had not been handed up, we had not been told about that until comparatively recently.

Deputy Eoghan Murphy

I do not think it limits the moral authority of the Department. If the Department is putting that much money into an organisation, whatever it is, then the Department has a responsibility. This is the case for a private individual as well as for the Government.

Mr. Michael Howard

I can assure the Deputy that if we had the moral authority we would use it but we wish to have a constructive relationship with the international federation. However, the federation also has a very strongly held view in this regard. I understand entirely the point the Deputy makes and I accept the validity of his questions. However, we are walking on something of a tightrope with regard to the independence of the organisation and the fact that I am sure must weigh on the minds of the international federation, that however well intentioned the Irish Department of Defence is with regard to the Red Cross in Ireland, the federation can only have one standard for the whole world. Not every equivalent Department of Defence in other countries where the International Red Cross operates is as benign an institution as is this Department. The federation has to be very mindful of this fact.

Deputy Eoghan Murphy

I fully appreciate that point. Perhaps we may need to flex our muscles more with the international organisation to ensure it is carrying out better governance of the Irish organisation.

To move on, Mr. Howard said earlier that things are quite different today as regards governance. However, allegations have been made about the recent appointment of board members. A certain allegation was made that on 16 May 2011, the Minister for Justice and Equality, Deputy Shatter, wrote a letter to the Irish Red Cross expressing his concerns at the practice of reappointing long-serving board members. Within two weeks, two board members were reappointed, one of whom had served for ten years already and another for 21 years. Is this an accurate report?

Mr. Michael Howard

I am very reluctant to be drawn too deeply into the appointment of Executive Committee members. It should be borne in mind that this organisation is fundamentally a democracy, for the want of anything else. I know there is a tension but I do not wish to be drawn too deeply into this aspect. The fact that an allegation has been made does not necessarily mean that it is correct. However, I am slightly constrained because I may not be fully au fait with some of the allegations and I do not wish to be drawn too deeply into answering without knowing the implications. I am aware that allegations are being made which have caused great hurt and offence to some of the individuals to whom they relate.

Deputy Eoghan Murphy

I appreciate these are allegations and I am clear in saying that. Am I correct in saying the Minister wrote a letter to the society expressing his concern about the practice of reappointing long-serving board members?

Mr. Michael Howard

Yes. This issue has been addressed as part of the corporate governance review.

Deputy Eoghan Murphy

Was the Minister ignored in the reappointment of board members?

Mr. Michael Howard

I think that would be an unfair characterisation.

Deputy Eoghan Murphy

Were long-serving members reappointed?

Mr. Michael Howard

If I am correct, the Central Council elects the executive committee and again this is an example of an independent organisation with its own democratic structures operating. It would not be fair to say that the Minister was ignored. The Minister has had discussions, as have I and other officials, with the Irish Red Cross and its desire, very much, is to ensure that everybody is completely reassured. The measures which the organisation is putting in place will do this. The developing corporate governance programme is addressing provisions to provide for rotations of posts so in that respect, the Minister's opinion is being taken into account and is being shared within the organisation. The fact that something may have occurred just after the Minister had written his letter, I do not think it would be fair to characterise this as the society ignoring the Minister because in other ways it has taken account of that view.

Deputy Eoghan Murphy

Is it true to say that, for example, the treasurer of the organisation has been the treasurer for the past ten years and was recently reappointed?

Mr. Michael Howard

Yes.

Deputy Eoghan Murphy

The vice chairman was vice chairman for 21 years and was recently reappointed.

Mr. Michael Howard

Yes.

Deputy Eoghan Murphy

I am not commenting on the individuals in question but this, in itself, flies in the face of good governance.

Mr. Michael Howard

Quite specific proposals are being taken on board by the Irish Red Cross in order to address this in the future but I must draw the attention of the Deputy to the fact that the vice chairman, for example, is elected.

Deputy Eoghan Murphy

Then it seems that the international organisation is not impressing upon the Irish organisation the need for it to adopt better standards of governance within its organisation.

Mr. Michael Howard

I ask the Deputy to please understand me that the need for better governance is absolutely understood.

Deputy Eoghan Murphy

I appreciate the position in which Mr. Howard finds himself, that he is trying to defend someone when he is no longer in a position to defend him. Mr. Howard has no responsibility for the governance practices and that is the difficulty of the exchange between us now. I would love to be asking the Irish Red Cross Society what it is doing.

Mr. Michael Howard

With regard to the future I think the organisation would be able to comprehensively reassure the Deputy. To return to the issue the Deputy raised about the reappointment, this has been taken into account by the organisation in the rule changes which are being introduced. The fact that two weeks after the Minister wrote to the organisation it addressed the current vacancies with the rules that were then current, I do not think it would be fair to say that this constituted an ignoring of the Minister. The organisation has taken the point he made and it is incorporating it for the future.

Deputy Eoghan Murphy

I understand that point. On the point about rule changes, will there be a limit to the terms of board service?

Mr. Michael Howard

Yes. They are talking about a limit of two terms and then a member must take a break.

Deputy Eoghan Murphy

Is that a break for one term and then a member may come back on the board?

Mr. Michael Howard

Yes.

Deputy Eoghan Murphy

Could a person serve as treasurer for two terms and then immediately serve as vice chairman?

Mr. Michael Howard

This is correrct. A more sustantive reply will be provided with the formal reply letter.

Deputy Eoghan Murphy

I would like to know because this could be a way of getting around term limits.

Mr. Michael Howard

The intentions of the organisation are honest in this regard.

Deputy Eoghan Murphy

I appreciate very much Mr. Howard's attempts to answer on behalf of the society.

Chairman

I remind Deputy Murphy that the details of this debate will be conveyed to the management of the Irish Red Cross. We will ask for answers to the questions members have raised.

Deputy Paschal Donohoe

Unfortunately, I missed much of the question and answer session because I was speaking in the Dáil Chamber. I strongly support the Chairman's proposal that we write to the Irish Red Cross seeking its response to the issues raised at this meeting. What has transpired has been somewhat unfortunate in the sense that the Department of Defence has been ahead of the curve in many ways in terms of its modernisation programme and dealing with the challenges it faces. I am aware of that from my own experience of seeing a particular barracks in operation, which is backed up by what others tell me. However, the majority of our time this morning has been taken up with discussion of an organisation for which the Department is not directly responsible.

Having said that, I agree with Deputy Murphy's point that although the moneys under discussion did not come from the Exchequer, it is nevertheless reasonable for citizens to expect the State to play a role in ensuring that all such donations are spent in accordance with best corporate governance and so on. It is imperative that we receive a response from the Irish Red Cross on the points raised.

I have a question for the delegates, for which I apologise if it has already been raised. On the existence of bank accounts which were not disclosed at the time, is it still the case that individual branches can have their own individual bank accounts? Will that be dealt with under the new arrangements the Department has made?

Mr. Michael Howard

Yes, that matter has been dealt with. A tight control framework is now in place in regard to bank accounts, who can sign them and so on. Details of the funds therein must be returned to head office and all treasurers must complete and return a detailed questionnaire confirming that they have accounted for all of the moneys involved. I take this opportunity to reiterate my assurance that anybody who donates money for a specific appeal or purpose can be absolutely confident it will be used for the intended purpose. We have seen copies of the Irish Red Cross's documentation. It has put in place a very good control network, with explicit rules whereby one cannot run a branch bank account without returning details of it to head office. There is a certification process in place for branches.

Chairman

Does Mr. Buckley wish to respond?

Mr. John Buckley

There are two broad streams of work going on in regard to this matter. One is at the level of design, where the statutory instrument will be amended. That instrument gives the Government the power to make provision in regard to all or any of these matters, including finances and accounts of the society. That stream of work is ongoing. The second stream relates to the codification of systems procedures and practices within the organisation. Some of those movements are detailed in the report I made and the Accounting Officer alluded to others. Both the Department and the audit staff must monitor the implementation of these two streams of work.

Chairman

Is Vote 24, Charitable Donations and Bequests, agreed, and is it agreed to note Vote 36, Defence, and Vote 37, Army pensions? Agreed. I propose that we do not dispose of chapter 32, Financial Control in the Irish Red Cross Society, until we have written to the organisation with a transcript of this meeting and received a response. Is that agreed? Agreed.

The witnesses withdrew.

The committee adjourned at 12.35 p.m. until 10 a.m. on Thursday, 20 October 2011.